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The Trading Room: Weekly Market Review – Week 26, 2020

Global equities sank as Stocks gave back the previous week’s gains and perceived safe-haven assets like treasuries and gold gained on Friday as investors weighed hopes that the global economy will continue to rebound from the coronavirus pandemic’s economic damage against concerns over a resurgence in the coronavirus in the United States offset enthusiasm over some positive economic data.

On Thursday, financial stocks rallied on news that the Federal Reserve was easing restrictions put in place following the financial crisis of 2008–2009, including allowing certain types of riskier investments and lowering some margin requirements, global investors hope central banks will follow this suit. Financials fell back sharply Friday morning, however, on the previous evening’s news that the Fed was planning to restrict banks’ ability to pay out profits to shareholders through dividends and share repurchases.

United States

In the US, concern about the quickening spread of COVID-19 overshadowed data that mostly pointed to improving economic conditions. Some reports, including durable goods orders and new home sales, firmly beat expectations, suggesting the widely hoped-for “V-shaped” recovery. However, the slowly declining, but persistently high level of jobless claims suggested a less-robust return to business. Purchasing managers’ indices (PMIs) showed strong improvements but did not cross from “contraction” to “expansion” territory. Weakness was widespread in the S&P 500. Technology and consumer discretionary fell the least. These two sectors are dominated by mega-cap Apple Inc. and Microsoft Corp., and Amazon.com Inc., respectively. New all-time highs for each of these names pushed the Nasdaq index into record territory.

Europe

European shares fell amid trepidation about a resurgence of coronavirus infections that could halt an economic recovery and a flare-up in trade tensions between the U.S. and Europe. The pan-European STOXX Europe 600 Index ended the week 1.89% lower, with major European indexes mixed. Germany’s DAX Index declined 2.09%, while Italy’s FTSE MIB Index slipped 2.33%, and France’s CAC-40 Index slid 1.34%. The UK’s FTSE 100 Index fell 0.87%.

Consumer and business confidence measures in Germany and France also improved. However, investors focused instead on COVID-19 news, the discouraging IMF forecast and the renewed threat by the US to impose tariffs related to a long-standing dispute over government subsidies to aircraft makers

Asia

Stocks in Japan were flat for the week. The Nikkei 225 Stock Average advanced 33.29 points (0.15%) and closed at 22,512.08. The large-cap TOPIX Index and the TOPIX Small Index, broader measures of Japanese stock market performance, were also little changed. After a strong rally in May and early June, equity gains have largely stalled over the past two weeks.

China’s large-cap CSI 300 Index and benchmark Shanghai Composite Index rose 1.0% and 0.4%, respectively, in a week containing few major economic readings. China’s sovereign 10-year bond yield was broadly flat for the week as investors mostly stayed on the sidelines waiting for clarity regarding further monetary measures. The People’s Bank of China (PBoC) left its loan prime rate (LPR), which serves as a reference rate for new local currency bank loans in the country, on hold for the second month at its latest policy meeting.

Kenya

The benchmark Nairobi Securities Exchange All Share Index (NASI) shed 6.83 points during the week to close at 137.75, representing a 1-week decline of 4.72%, a 4-week loss of 0.86%, and an overall year-to-date loss of 17.22%. The NSE20 share index similarly shook off 30.83 points to close the week at 1,938.62. points; this represented a week’s loss of 1.57% and a year to date loss of 26.97% while the NSE25 share index parred 100.95 points or 3.03% to close the week at 3,231.32. points an equivalent of 21.20% on a year to date loss.

The week’s turnover for the equities market was lower, with the market having trades on 146 million shares valued at Kes.2.7 billion against 133 million shares valued at Kes.3.2 billion transacted the previous week.

Safaricom was the week’s top mover, moving shares worth Kes 1.4 billion, an equivalent of 52.9% of the week’s total traded value. The counter declined 7.8% , from the Kes 30.90 the previous week, to close Friday at Kes 28.50.

The NSE20 share index one year chart performance.

The Derivatives Market closed the week with a total of 27 contracts valued at Kes.803,000, this was lower as compared to the 65 contracts valued at Kes.1.8 million concluded the previous week.

Trading on the secondary bond Market at the Nairobi Securities Exchange improved in activity with bonds worth Kes 20 billion transacted this week as compared to the Kes.11.9 billion registered on the previous trading session.